[TheBank]

229.16(c)(3) requires a disclosure about overdraft charges if the case-by-case hold notice is not provided at the time of deposit. The commentary states that this paragraph is not required on exception hold notices provided the notice complies with 229.13. Exception hold notices must be provided at the time of deposit, but if the deposit is not received in person it must be provided within 1 day of the deposit, and if facts surface later, within 1 day of when the new information becomes known by the bank. As long as we meet the timing and other disclosure requirements, we do not need to include that disclosure on the exception hold notice, is that correct? I noticed that C-12 model forms for exception hold notices do include the disclosure about OD charges if the notice is not provided at the time of deposit, so that is making me question this. Are they including that for cases where the notice is not provided timely, or is it required regardless?

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[rcooper]

229.13(e)(2) is where you’ll see that overdraft notice language requirement.
(e) Reasonable cause to doubt collectibility:
(2) Overdraft and returned check fees. A depositary bank that extends the time when funds will be available for withdrawal as described in paragraph (e)(1) of this section, and does not furnish the depositor with written notice at the time of deposit shall not assess any fees for any subsequent overdrafts (including use of a line of credit) or return of checks of other debits to the account, if–
(i) The overdraft or return of the check would not have occurred except for the fact that the deposited funds were delayed under paragraph (e)(1) of this section; and
(ii) The deposited check was paid by the paying bank.
Notwithstanding the foregoing, the depositary bank may assess an overdraft or returned check fee if it includes a notice concerning overdraft and returned check fees with the notice of exception required in paragraph (g) of this section and, when required, refunds any such fees upon the request of the customer. The notice must state that the customer may be entitled to a refund of overdraft or returned check fees that are assessed if the check subject to the exception is paid and how to obtain a refund.

You see this language being included in model form C-13 (form for Reasonable Cause Hold) and also in C-12 which can be used for the Reasonable Cause hold. My suggestion is to include what is included in the model form. You won’t go wrong with that.

[Author]

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